At the Riksbank International Symposium, Fed Chairman Jerome Powell hints without mincing words that even for 2023 there will be rate hikes probably up to 5% and that the Fed’s action will not stop regardless of the macro picture.
2023 begins in the same way as 2022 had ended: in anticipation of CPI data, Jerome Powell, chairman of the US Fed, speaks during the Swedish keynote speech talking about the fight against inflation as a problem that requires bold measures that will be able to go against public opinion in order to be effective.
The Federal Reserve Chairman is aware of the problems that realigning prices through rate action brings but it is a necessary evil for the health of the US economy and indirectly the entire planet.
Following the speech in Stockholm at the Riksbank with tones of a true hawk of economic policy, the stock markets in Europe close weak and Milan thus loses 0.08%, meanwhile Schnabel of the European Central Bank along the lines of what the top US economic figure says that rates still have to go up a lot because the problems will not resolve themselves.
The stock markets, remembering the pains suffered in the past year in fighting the great evil of inflation, did not pop champagne at the words of the president of the American economic body.
In 2022, altogether, interest rates were raised by more than 4% to the tune of 75 basis points and 50 basis points.
The Federal Reserve presidents in Atlanta and San Francisco yesterday said they think rates will have to touch at least 5% to reach a reasonable level of effectiveness and safety before they can take a break.
Powell’s words and those of the local presidents of the monetary policy body were echoed in stock markets around the world with Tokyo’s only counter-trend figure rising 0.78%.
The words of Fed Chairman Jerome Powell
Europe is greatly affected by the statements made at the International Symposium organized by the Riksbank, where Powell explained how economic measures and policy must make their own choices independently and without one interfering with the other and vice versa.
Price stability is the real goal to strive for, despite the fact that the sacrifices made and to be made are so important because the economic fabric of the country depends on it.
According to Isabel Schnabel, a member of the Executive Board of the European Central Bank at the symposium microphones:
“to solve the current inflation problem, financing conditions will have to become tight so as to slow down the growth of aggregate demand, necessary to reduce the upward pressure on prices that has resulted from the lasting damage to the euro area’s productive capacity euros caused by the energy crisis. It is essential that we stick to our statutory objectives, and resist the temptation to broaden our field of action in the face of other, important social problems.”
Around the world, the echoes of the Swedish interventions by the world’s financial elite have had their effects and so for example, Italy’s main stock index, the Ftse 100 closes poorly losing 0.40% of its value to 7,693.70 points (Ftse Mib -0.08%) the Dax in Frankfurt loses 0.15% to 14,770.45 points and the Cac40 in Paris is no different, losing 0.55% to 6,869.14 points.
The spread between the German Bund and its Italian counterpart (BTP) is falling sharply to 191 basis points while the effect on the Italian 10-year is that the value jumps to 4.21%.